'Won't It Encroach Upon State's Right?' : Supreme Court Extends Stay Of ED Investigation Against Tamil Nadu's TASMAC

The Supreme Court on Tuesday (October 14) extended the interim order restraining the Enforcement Directorate from taking coercive action, including search, seizure or investigation, against the Tamil Nadu State Marketing Corporation (TASMAC) in connection with the liquor retail scam in Tamil Nadu.Granting leave to appeal in the Special Leave Petitions filed by TASMAC and the State of Tamil Nadu, the Court posted the matter after the review petitions against the 2022 Vijay Madanlal Choudhary judgment - which upheld the provisions of the Prevention of Money Laundering Act relating to arrest, search, ECIR, etc.,- is decided. This was because TASMAC raised arguments regarding the non-supply of the Enforcement Case Information Report, which the Vijay Madanlal decision held that need not be supplied to the parties.A bench of Chief Justice of India BR Gavai and Justice K Vinod Chandran was hearing the petitions filed by the State of Tamil Nadu and TASMAC challenging Madras High Court's rejection of its plea against searches conducted by the Enforcement Directorate on the TASMAC headquarters.Senior Advocate Kapil Sibal, for TASMAC, said that the State Vigilance itself has filed 47 FIRs against liquor outlet operators over allegations of corruption from 2014-21. However, ED entered the scene in 2025 and raided the Headquarters and took the phones and devices of the officers, Sibal said. Sibal said that as per Section 66(2) of the Prevention of Money Laundering Act, the ED has to share the information regarding the offences with the State agencies that are investigating the matter. Sibal asked why the TASMAC head office was being raided when the offence was committed by certain retailers, which the State was anyway investigating. "How can you raid government corporate offices? What happens to the federal structures of this country?" Sibal asked.Additional Solicitor General SV Raju, for the ED, submitted that the State vigilance itself has registered the FIR, and hence, the existence of predicate offence was undenied. The ED investigation found evidence regarding money laundering, the ASG said. He added that the State was protecting the officers.CJI then asked ASG, "What happens to federal structure? Law and order has to be worked within its own domain." ASG replied that the ED has found incriminating offences.CJI asked if the ED investigation would not infringe upon the State's right to investigate. "Would it not amount to encroachment upon the right of the State to investigate? In every case, when you find that the state is not investigating the matter, you will go and do it yourself? What happens to Section 66(2)?" CJI asked.ASG said that the ED has the power to search as per Section 17 PMLA if there are "reasons to suspect". The use of the word "suspect" means that the threshold is less, ASG submitted. ASG said that the search actually led to the discovery of materials. "Did we wrongly suspect? We have found. Large-scale corruption was there. That corruption is sought to be concealed with the arguments on federalism," ASG said. "The searches were conducted in a decent and systematic manner. The panchnamas would show rampant corruption," he added."It is not as if the State agencies were keeping silent."CJI said."That is true. But they are investigating the predicate side of the offence. They have also closed 37 FIRs in a short time. Predicate offence goes, ED goes. They are trying to cut off the ED by closing the FIRs one by one," ASG said."Last six years we have had opportunity to deal with many cases of ED...I don't want to say more, last time I said something, it was reported everywhere," CJI said. It may be noted that on the last hearing, while staying the ED's investigation, CJI had made certain strong remarks that the ED was "crossing all the limits and was violating the federal structure." "When something is said in favour of the ED, it is hardly reported. That is my grievance," ASG stated.Sibal said that 'corruption' is an offence within the jurisdiction of the State. "Corruption is the predicate offence. It is to be investigated by the State. CBI can investigate with the State's consent. But ED is investigating corruption. How can they do?" Sibal asked. Raju countered, "I am not investigating corruption. I am investigating money laundering.""If it is corruption, then why are you raiding the corporate office. Corruption is by individuals, why raid the corporation?" Sibal asked. He submitted that since the ECIR copy is not served, they are not aware of the allegations. Raju responded that ECIR was only an internal administrative document, and there was no requirement of the law to even register it for investigation. He pointed out that the 'Vijay Madanlal Choudhary' judgment has held that ECIR need not be supplied to the accused.The bench observed that it is bound by the Vijay Madanlal judgment, delivered by a three-judge bench, until it is reviewed."I don't know when it will be decided, from the last three ...

'Won't It Encroach Upon State's Right?' : Supreme Court Extends Stay Of ED Investigation Against Tamil Nadu's TASMAC

Anmol Kaur Bawa & Gursimran Bakshi

"What happens to the federal structure?" CJI asked the ED.

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